Agri Business

‘Commodity finance has nothing to do with market prices’

Vinson Kurian Thiruvananthapuram | Updated on April 06, 2018 Published on April 06, 2018

Commodity financiers always see a case for requirement of finance, irrespective of what happens to the price of the underlying commodity.

“I’ve nothing to do with commodity prices. I neither lose or benefit with the up and down cycles nor take any position in commodities,” says Sudip Bandyopadhyay, Chairman, Inditrade Group.

With gradual professionalisation of the warehouse network, the need for financing will exponentially grow. Inditrade works in collaboration with such professional warehouse service providers.

“We provide finance against a stock of a particular commodity subject to certain terms and conditions,” Bandyopadhyay told BusinessLine. Commodities are quite unlike any other security.

He cited the case of turmeric as an example. There’s a particular season of the year when the entire turmeric production comes into the market.

Time for market

In fact, every commodity has a time when it comes to the market. But somebody has to buy it. If somebody has to buy it, it opens the scope for financing.

This has been happening over the past hundreds of years. As the turmeric crop becomes available in the market in the month of August, a trader buys and keeps it. “He sells it to you and me to consume in December, January or March. That’s how the business operates. So a commodity comes in only at a point in time, somebody has to buy it and store it so that rest of us can consume throughout the year.”

There are two types of financing in agriculture — pre-harvest financing and post-harvest financing. Banks have been focused completely on pre-harvest financing.

These loans are given to farmers for feed or fertilisers. But Inditrade operates only in post-harvest finance. It and other organised players disburse around ₹10,000 crore an year.

Inditrade does not normally go beyond ₹5 crore to a single party in a single transaction. It has put internal limits commodity-wise, though they keep changing with season and the crop.

Published on April 06, 2018

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.